Obsession With Central Bank Action is Unhealthy, But Typical

The great question revolving around Greece is now answered. It remained
unanswered when the opening segment of NFTRH192 was written. Here is how
one writer was trying to deal with these and other questions over the weekend:

Obsession With Central Bank Action is Unhealthy, But Typical

"We're seeing some positive sentiment return on account of a few things:
the prospect of coordinated intervention in the event of a sloppy Greek election,
or outright victory of an anti austerity party," such as Syriza, said Andrew
Wilkinson, chief economic strategist at Miller Tabak & Co. -MarketWatch

NFTRH has been managing what I believe could be a pivot to a coming intermediate
bullish phase in the broad markets. For several weeks now my response to the Ticker
Sense sentiment poll has been 'Bullish'. This has been largely due to markets'
[previous] proximity to important support, pervasively bearish sentiment, an
over bought/over owned US dollar and the 'Sitting Democrat' election year cycle.

A potential 'QE' component is part of the analysis because as I have taken
pains to illustrate, a deflationary environment has reset the entire casino
from its former 'inflation expectations' stance of a year ago to one that is
on pins and needles about Greece, Spain and Europe in general, as the US economy
continues to steadily grind out signs of economic deceleration and China's
growth has slowed from unsustainable hyper levels.

There was going to be no overt Central Bank action amid a rising prices/costs
backdrop and 'off with their (the inflators') heads!' sentiment among the public.
Against the current backdrop, there could be. But again, a watched QE pot may
not boil on demand.

So let's try to break down the scenarios that could be in play as markets
open on Monday, after the Greek election has come and gone.

Scenario 1: Pro-Austerity, Pro-Euro Forces Win, Order Maintained

Is it possible that markets could react negatively to this news? Have they
really been rallying on the prospect of an asymmetrical disaster and inflationary
response? It is likely that policy makers, especially in the US, would stand
down in the very short-term on this news and the market would be left on its
own.

Rather than the thrills and spills of cataclysm and official response, we
would be left with an economy that is grinding and decelerating (Empire Manufacturing
was the headline disappointment last week), but all would appear 'normal' (whatever
that word means in levered up modern markets) at least.

The Fed meets on June 19-20 and I think it would be foolish for a writer to
try to pick apart all the different moving parts that are in play and come
up with some kind of a forecast. But if Scenario 1 carries the day we are back
to the normal plan, which sees the inflators being 'drawn out' of hiding by
economic events that steadily continue toward our 'economic contraction' scenario
that comes against a backdrop of inflation fears being little more than a distant
memory.

This is the favored scenario for the ongoing analysis that sees general gold
mining fundamentals marching higher in the form of rising gold-commodities
ratios ('real' price of gold or RPG) as the economy continues to contract.
If the gold mining sector gets hit as QE cultists abandon ship, this could
present another buying opportunity for one of the few sectors that benefit
fundamentally from the counter cycle.

Scenario 2: Anti-Austerity Forces Win, Greece to [Renege] on Obligations and
Leave the European Union

Asymmetry would immediately come to the fore, with emotions running high and
all eyes on Spain, Italy and any other 'next dominoes' that could tumble. Words
like contagion and crisis would go global and go into hyper drive. All of this
would be against a backdrop of already slowing economic activity. Policy makers
would be compelled to act.

There is no telling what could happen to gold in this scenario. Gold is simply
a much hyped, much obsessed upon anchor to monetary sense; to simplicity, as
opposed to the violently thrashing thing that Keynesian geniuses have created
for us over the many fiat decades of credit and debt creation.

Would Ben Bernanke be fiddling around with yield curve manipulation (Operation
Twist) in this scenario or would he go full steroidal with massive purchases
of long-term Treasury bonds without the sneaky window dressing of selling short-term
ones? If the mission is 'increase money supply in a compelling manner for all
the world to see', he will be a man and tell the world "I am Ben Bernanke
and I am here to inflate, as has been my Raison d'être since I first
made headlines in my speech entitled Deflation: Making Sure "It" Doesn't Happen
Herehttp://is.gd/q2NIub."

The US Fed would also have the cover of being 'coordinated' with other global
inflators and acting for the good of all against the contagion in Europe.

What's It All Mean?

If I knew, I would not be writing you today because my riches and power would
be beyond imagination. Instead, we are stuck in a failing system, you and I.
The system is broken and is run by people who make it more broken with every
policy response.

Inflation has been the problem since gold was finally and completely sent
to the wilderness in the early 70's. It is just that the degrading process
takes longer to play out than the 70's gold bugs (and possibly even the current
era's newly minted gold bugs) might have ever dreamed possible.

In short, whether the world blows up on Monday or order is maintained, the
system is suffering from the leverage of credit/debt-based policy that came
before. Personally, I vote for stability and maintenance of the illusion for
now. I vote for Greek Austerity and continued market management along the current
course.

So the balance of #192 is going to proceed as if some sort of order will be
maintained since I think it would be foolish to try to quantify the tiger by
the tail that would be the alternative. That wildcard must be considered an
asterisk (emphasis on the last 4 letters of that word) on the analysis this
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